AUD/USD: 0.9245EUR/USD: 1.3600The dollar is higher today, with the Euro under pressure ahead of Thursdays ECB meeting, and the DXY seems to be breaking important resistance which suggests that more of the same may lie ahead. Today's EU CPI will give an important lead into Thursday's ECB outcome. Ahead of that, we get the Australian Retail Sales & HSBC China Mfg data and then the RBA IR decision/ press statement, which could keep the Aud under pressure if Glen Johnson paints a dovish outlook. NZ gets Terms of Trade. Later in the day, US factory orders will be the focus.
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The Euro has been stuck in a relatively tight range against the dollar today, either side of 1.3600, after mixed data from the EU and the US, with neither currency able to make any real gains ahead of Thursday’s ECB meeting. The generally soft EU PMI’s aided an early decline to 1.3594 but the Euro squeezed back towards 1.3625 after the German CPI release saw some short covering; it slowed more than expected to 0.9% yy in May (exp 1.1%), down from 1.3% in April but was unable to break below the support. A miscalculated US ISM had the market confused but the dollar eventually regained its ground and headed back to 1.3600 where it sat at the NY close.
Today sees the EU CPI number (exp 0.7% yy), and a low reading will add further pressure to the ECB to act on Thursday, although it is pretty much written in that threr will be an easing so downside progress may be slow, with much depending on Mario Draghi's outlook. In the meantime, being back at 1.3600 means that little has changed from a technical perspective and it would not really surprise to see the Euro chop around close to current levels until Thursday.
We are currently sitting right on the major Fibo support at 1.3596 (76.4% of 1.3475/1.3995) a break of which would return to the minor double bottom at 1.3588, where there was previously talk of good Asian demand. Below here though would see a drop towards 1.3560 (27 Feb low) and then to 1.3520 (38.2% of 1.2754/1.3995) but I doubt we head down here yet.
On the topside, the 200 HMA is at 1.3630, ahead of today’s peak at 1.3636. A break of this would see further sellers at 1.3650 (daily Tenkan) and then at last week’s high of 1.3668. The first Fibo level to watch is at 1.3680 (23.6% of 1.3993/1.3585) a break of which could head on to 1.3700 and 1.3739 (38.2%/100 DMA).
The EU CPI will be the focus and I suspect that 1.3585/1.3630 may again more or less cover the action. EU Unemployment also due.
Keep an eye on the DXY which appears to be in the process of taking out the important resistance at 80.60 (see yesterday's outlook: www.fxcharts.com.au) and could be a sign that the dollar is about to pick up some positive momentum.
Economic data highlights will include:
EU CPI, Unemployment US Factory Orders
Jim LanglandsFX Charts www.fxcharts.com.au
